Costs increase, labour supply dwindles in Thailand's construction industy

[StrontiumDog]

Costs increase, labour supply dwindles in Thailand's contruction industy

Costs increase, labour supply dwindles in Thailand's contruction industy

Firms hike project bids and consider foreign labour

Somluck Srimalee
The Nation (Thailand)

Publication Date : 29-04-2011

Contracting firms in Thailand that are facing increasing construction costs and a tight labour market say they may have to increase their bidding prices for new jobs and use foreign labourers.

The president of the Thai Contractors' Association under the King's Patronage, Polpat Karnasuta, said the cost of construction raw materials had risen by 10 to 20 per cent this year, compared to prices in 2010.

This is forcing contractors to raise their bidding prices when they compete for new projects, to cover their rising costs.

On existing projects for which they estimated costs and signed contracts last year, they are feeling lesser impacts because most firms signed long-term contracts to buy construction raw materials to cover projects up to completion.

However, in cases where long-term contracts have not been used to stabilise prices, projects may be running at a loss, he said.

Polpat said the construction industry was also facing a tight labour supply because most Thai labourers were not interested in working in the contracting business. The labour shortage comes at a time when the construction industry is showing signs of growth following the government's decisions to launch new mega-projects, especially new mass-transit rail links worth more than 500 billion baht (US$16.7 billion).

Private-sector developers are also expanding their investments, especially in the residential market, with projects worth more than 200 billion baht ($6.7 billion) a year. The increasing amount of construction work will demand more labour despite the tight market, he said.

Ch Karnchang president Plew Trivisavet agreed that his company was facing a tight labour situation.

At present, it employs 5,000 labourers for projects with a total value of 30 billion baht ($1 billion). However, Ch Karnchang has made bids for new projects worth at least 20 billion baht ($667.6 million), and if it wins these it will need to add at least 500 to its labour force.

"We may have to employ foreign labour to support our business growth," Plew said, adding that all of the labourers currently employed by Ch Karnchang were Thais.

He said his company managed its costs for construction raw materials by signing long-term contracts to cover complete projects, of for periods between six months and a year. This was enough to stabilise its costs and generate a gross profit margin this year averaging 10 per cent. The gross profit margin was only 5 per cent last year.

Property developers have long adopted the same strategy to manage their construction costs. Most of them sign long-term contracts to buy construction raw materials at fixed prices over six months or one year, depending on the type of raw material.

Senior executives of two of the biggest developers, Pruksa Real Estate and LPN Development, said they routinely signed long-term contracts covering six months or a year for supplies of raw materials.

This not only manages their construction costs but helps to maintain residential prices, they said.

[Mid]

Bangkok Poll: Laborers want higher wages

[BobR]

It's probably the same crap as at home; the Thais want to make enough to have a decent standard of living and foreigners will work for much less. Corporations cry, whine and use lobbyists and bribes to get what they want. Sadly they usually do.

[artist]

The labour force here is in very short supply, you train and days later they quit to a better paying job. The labour force is now getting very poor in relation to skill and with the labour board demanding way too much leeway to the worker, double time on Sunday means half dont turn up on Monday as take one of there 30 day sick leave days. Big projects will soon be looking to other countries for their labour and placements of multi million dollar jobs.